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Egypt Beats Euro T-Bill Sale Target as Demand Boosts Deposits

Egypt sold 550 million euros ($736 million) of treasury bills today, more than it sought, and yields fell after political unrest this year spurred an increase in foreign-currency deposits.

The government issued the one-year securities at an average yield of 2.49 percent, compared with 2.55 percent at the last auction in November, according to central bank data on Bloomberg. Egypt has 513 million euros of one-year debt maturing tomorrow that were sold at a 3.25 percent average yield, according to data compiled by Bloomberg.

Egyptians have boosted holdings of other currencies since the central bank eased its support for the pound in December, triggering a depreciation of more than 11 percent against the dollar since. Foreign-currency deposits at banks surged 21 percent in the year to June, compared with a 5.1 percent advance a year earlier, according to the most-recent central bank data. Similar-maturity pound-denominated debt yields are more than five times higher.

“We’ve seen people flock to safe-haven currencies over the last year because of the fear and uncertainty and that has helped raise foreign-currency deposits,” Ahmed El Khouly, head of treasury at Housing & Development Bank, said by phone. “It’s a very good investment for the banks on sovereign risk, which is relatively safer than corporate lending.”

Continued Arrests

The government continued arrests of Islamists amid a violent crackdown of protesters that’s left about 1,000 people dead since Aug. 14. Violence has increased since the military forced former President Mohamed Mursi out of office on July 3.

Police arrested Osama Yaseen, a member of the Muslim Brotherhood and Youth Minister under Mursi, along with the secretary to the group’s deputy head Khairat el-Shater, the state-run Middle East News Agency reported today. El-Shater and Mohammed Badie, the Muslim Brotherhood’s spiritual leader, stood trial yesterday on charges of inciting violence.

Egypt started selling foreign-currency debt locally in 2011 to replenish foreign reserves, which have dropped by about half since the 2011 uprising that toppled Hosni Mubarak. The country had 53.3 billion pounds of outstanding local dollar and euro-denominated debt at the end of March, central bank data show.

The yield on the nation’s $1 billion of benchmark 5.75 percent eurobonds due in April 2020 fell five basis points, or 0.05 of a percentage point, to 9.01 percent at 4:23 p.m. in Cairo, trimming this month’s advance to 18 basis points.

The Finance Ministry also met its 3 billion-pound target at an auction of three- and seven-year treasury bonds, according to central bank data. Accepted yields for 2016 notes ranged from 13.63 percent to 13.79 percent while those on 2020 debt ranged from 14.95 percent to 15.04 percent, the data show.

The pound was little changed at 6.9864 a dollar after a central bank auction of the U.S. currency today.

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